Australia to impose lower 'backpacker tax' after outcry

And so the Liberal state government on Monday was quick to welcome news of a compromise 15 per cent tax, which seems to have gained support to pass the Senate.

Backpackers in Australia now do not pay a tax unless their yearly income exceeds $18,200.

There are reports an amount of discontent is brewing inside the National Party over Mr Broad's actions, with the majority preferring to keep pushing for a 19 per cent rate.

One Nation leader Pauline Hanson said if the government did not compromise, farmers and other industries reliant on a strong horticultural sector would suffer.

Foreigners in Australia on working holidays face paying a 15 per cent levy on every dollar they earn after the government Monday compromised on a controversial "backpacker tax", dumping plans for a higher rate.

And Morrison declared Labor could "take a flying leap" if it thinks it can negotiate it down further.

Senator Hanson has taken ownership of the 15 per cent proposal.

"This week, hopefully even today, this matter is resolved".

Treasurer Scott Morrison said the tax rate would cost the Australian budget $120 million over four years.

Earlier, independent Nick Xenophon who supported the 19 per cent rate warned of dire consequences for fruit farmers if parliament didn't agree on the backpacker tax before the week's end.

The 15¢ rate is expected to apply up to $37,000, and then normal tax rates will apply.

Treasurer Scott Morrison has announced the Turnbull Government will settle on a 15 percent tax on the earnings of backpackers, amid warnings that summer fruit may rot on trees if backpackers won't pick them.

"This is a win for farmers, small business and tourism, but this is also a win for One Nation and a win for common sense", she said.

"All backpackers do is look at the headline rate", he said.

NFF chief executive officer Tony Mahar said the backpacker tax debate has been a painful process, but the federation wholeheartedly welcomed the announcement that a compromise rate of 15pc has been reached.

"ATEC members, businesses which are at the coalface of the export tourism industry, are telling us they are experiencing a 20-30% decrease in visitation from this market and they are very eager to get Australia back on track".

The government has made a second back down in as many months on the backpacker tax.